UK house prices are at the same level as a decade ago once London homes are stripped out, according to new research.

The average property value recorded by monthly Land Registry figures stands at £177,299, but with Greater London removed the figure across England and Wales stands at just £133,538.

This is in line with the £133,126 level seen in July 2004 and should dispel fears of a new national house price bubble, claims analysis by property investment specialist London Central Portfolio.

But ONS figures also show wages adjusted for inflation back to 2004 levels too, with workers suffering their own lost decade.

Back to the future: House prices are stuck at 2004 levels once the London property market is removed

A gulf between London house price inflation and much of the rest of Britain has skewed headline property index figures in recent years.

The Land Registry September figures showed London house prices up 18.4 per cent annually, while the overall England and Wales figure was 7.2 per cent and in Yorkshire and the Humber prices rose by just 1.4 per cent.

The average price of £177,299 now stands just 2 per cent below its peak before the financial crisis hit, but LCP’s number-crunching shows that with London removed prices are much further away from their record level on the index.

Its figures post an average price for England and Wales excluding London of £133,538 - 16 per cent below the December 2007 peak of £158,494.

Naomi Heaton, of LCP, said: These figures suggest that housing stock outside of Greater London is still affordable. The slow recovery indicates that positive economic sentiment and the feel-good factor are still missing.’

LCP says that once London is removed from the equation, the current residential property market growth rate stands at 3.1 per cent and if that continues it will take five more years to regain the 2007 peak.

She said: ‘Residential property prices in the UK move in cycles. Periods of growth are generally followed by periods of consolidation. We should be entering a new growth cycle given prices are only at the same level as 10 years ago and are, without doubt, suppressed currently.’

LCP has previously criticised the monthly Land Registry figures, as they exclude many property transactions. It does not include new-build homes, which make up a sizeable chunk of the market, and also excludes sales of properties held long term due to its repeat sales regression. This statistical trick aims to compare like-for-like sales and so the index does not include properties that have not been sold at least twice since 1995.

The Land Registry’s own all transactions data shows the average house prices as considerably higher, at more than £250,000. Despite questions over the accuracy of the average price, the Land Registry’s monthly index is useful for judging trends, similar to most house price reports with a long track record.

On the slide: Wages adjusted for inflation are also only at the same level as 2004

In LCP’s analysis house prices outside of London remain stuck no higher than they were a decade ago, but this does not necessarily make them considerably more affordable than the 2007 peak.

Wages adjusted for inflation have fallen since then and ONS analysis earlier this year showed real wages at the same level as early 2004.

The ONS report failed to split out wages for London and the rest of the country and so cannot be directly compared to the LCP analysis. Given the outperformance of the London economy since the financial crisis, however, it could be suggested that real wages outside the capital may have fallen even further than the average.

House prices compared to wages on a national level also remain exceptionally high. Nationwide’s measure of this shows homes have only been more expensive compared to earnings at the peak of the 2000s boom.

Riding high: House prices are more expensive compared to wages that at any time except the 2000s boom

The crucial difference in the property market now is that mortgage interest rates are near record lows.

Bank of England figures show the average two-year fixed rate for a borrower with a 25 per cent deposit stands at just 2.46 per cent. Borrowers with a 10 per cent deposit pay more at 4.4 per cent, but this is a record low for that loan-to-value level.

Mortgage rates have fallen since summer as lenders engage in a mini-price war.

This comes as expectations for when the Bank of England will raise interest rates drifted back to mid-2015 rather than early next year, and the cost of funding fixed rate mortgages on the money markets for lenders fell.

Banks and building societies have also now broadly got to grips with the tougher new mortgage rules introduced in April. These produced a marked slowdown in lending, and now lenders are playing catch-up to meet this year’s lending targets.

Despite the new crop of lower rates, London house prices look set to slow in the months ahead with the capital’s property market losing some of its head of steam.

Nationwide’s house price index showed annual house price inflation easing from 9.4 per cent to 9 per cent.

Commenting on the figures, Jeremy Duncombe, director, Legal & General Mortgage Club, said: ‘Rapid house price growth is not beneficial for the market as prices would ideally rise in line with wage inflation. The rapid increase we have experienced recently in parts of London and the South East left people at risk of being locked out of the market altogether.’

Estate agents report buyers less willing to chase expensive properties and sellers cutting prices. In the most recent Royal Institution of Chartered Surveyors report, its member agents revealed a majority of areas in London are seeing property price falls for the first time in nearly four years.

Yet while the picture for prices turned negative in London, elsewhere in the country most areas continued to report rising prices.

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House prices stuck at the same level as 2004 once London market is removed